Saving for a down payment on a house is often not an easy task. A down payment can be a substantial amount of money, depending on the price of the house, and a weekly or monthly savings plan can take years to add up to enough.
There are ways to use your 401(k) to buy a house, but doing so has implications you need to consider.
Here we’ll discuss the pros and cons of using your 401(k) to buy a house so that you can make an informed decision.
Pros of Using Your 401(k) for a House Purchase
Down Payment Assistance
If you’ve been contributing to your 401(k) for a while, using 401(k) funds can provide a substantial down payment, potentially leading to better mortgage terms and interest rates. Generally, the more you put down, the less risk the investor has, so they’re apt to give you more favorable loan terms.
Putting more money down also gives you immediate equity in the house, which can allow you to take out a home equity loan at some point for things like home improvements.
